Question

X Company uses the high-low method to predict monthly overhead costs. The following were May and September cost and activity results: May OH Cost Production $7,493 2,500 September $12,421 5,300 If December production is expected to be 3,300 units, what are expected total fixed overhead costs in December [round unit costs to two decimal places)? Submit Answer Tries 0/3

Answer 1

Variable overhead cost per unit = (OH cost in Sep -OH cost in May)/(No. of units in Sep. - No. of units in May) Variable overhead cost per unit = ($12,421-$7,493)/(5,300-2,500) Variable overhead cost per unit = $1.76 Total fixed overhead = May Total OH cost - May variable OH cost Total fixed overhead = $7,493 - (2,500 x $1.76) Total fixed overhead = $3,093 Total fixed overhead cost would be same for all month. Thus, the total fixed overhead cost in December is $3,093.